O See Hint Suppose seven individuals enjoy going to the comedy club. Their demand is as follows. Person Willingness to pay Allison Beatrice Cally David Ezekiel Francesca Gertrude 20 18 16 14 12 10 8 If the comedy club had a monopoly and a marginal cost of $7 per entrant, the comedy club would sell charge only one price. tickets if it could 15/17> SUBMIT ANSWER 9 OF 17 QUESTIONS COMPLETED MacBook Pro

Can you think of any examples of successful predatory pricing in the real world?

Why are urban areas willing to subsidize urban transit systems? Does the argument for subsidies make sense to you?

A friend of yours is considering two cell phone service providers. Provider A charges 120 per month for the service regardless of the number of phone calls made. Provider B does not have a fixed service fee but instead charges 1 per minute for calls. Your friend's monthly demand for minutes of calling is given by the equation QD = 150 50P, where P is the price of a minute. a. With each provider, what is the cost to your friend of an extra minute on the phone? b. In light of your answer to (a), how many minutes with each provider would your friend talk on the phone? c. How much would she end up paying each provider every month? d. How much consumer surplus would she obtain with each provider? (Hint: Graph the demand curve and recall the formula for the area of a triangle.) e. Which provider would you recommend that your friend choose? Why?

Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?

Suppose that an inventor discovers a new chemical compound that can change the color of people’seyes with no negative side effects. Since she holdsa patent on this chemical, she has a monopoly overthe sale of the new eye-color treatment. However,she’s an inventor, not a businessperson. Explain toher how she should set the price for the eye-colortreatment in order to maximize her profits.

Exercise 5. You are the manager for a monopoly with costs, demand, and marginal revenueas in the graph at the top on Figure 1.a. Does the fact that you operate in a monopoly always guarantee that you can achievehigher profits by increasing the price? Explain.b. Draw the area representing the profits on the top graph on Figure 1.c. Suppose one of your suppliers just announced an increase in prices for a specific partthat your product requires. What should the impact be to each of the curves on thetop graph of Figure 1? Explain carefully.d. Suppose economic conditions change in such a way that the demand curve for yourcompany shifts left.i. Draw a demand curve on the bottom graph on Figure 1 that leads to zero economicprofits.ii. Draw a demand curve on the bottom graph on Figure 1 such that any furtherleftward demand shift will cause you to shutdown.